The Temporary Bottom Train
Today’s session was quite interesting for both sides, but at the same time it was fairly simple as the market basically followed our projections/expectations from the weekend report and intraday comments. At the Sunday night open, ES quickly tanked to a low of 1893.5, which was in the major support area of 1892-1900 we had labelled from previous report. This meant that all the immediate targets at 1900 and 1891.75 were considered fulfilled as our margin of error for ES targets is 2.00 points.
At roughly 8PM on Sunday with ES trading at 1903~, the
hourly extreme oversold “A+ Tier” signal confirmed. This provided us with
deadcat bounce targets at 1933.50 and 1943.50 which are 40-50 points from the
1893.50 low. Remember, the main difference between “A+ Tier” and the regular
one “A” is quick 40-50 points vs. 25-30 points target. This paved the way for
the overnight bounce and it got as high as 1929 at the day session open before
bears made a double top bearish setup. In other words, the rebound was 35.5
points off the Sunday low.
For the rest of the day, we had projections for the dip to
either hold 1902-1907 or 1892 low for the bounce setup. Long story short, the
bears failed to capitalize on their breakdown setup by not breaking below 1892 and
bottomed at 1892.50. This created the large feedback loop squeeze back into 1HR
20EMA as we noted around 2:14PM.
What’s next?
Daily closed at 1912.5 and it’s pretty much a doji candle/spinning
top with roughly equal top and bottom tails. The large daily top 100% measure
move has been fully fulfilled and now looking for a deadcat bounce in the
context weekly bear train.
The bulls held the 1892-1900 major support area as we
anticipated from the weekend report but they were really pushed against the
wall by the bears as the temporary low was 1892.50. This means that the market
is still trading in a controlled manner because major support held on its first
try. This translates into very predictable movements with defined risk vs.
reward and it is currently not in a crash mode like August 2015 as the context
is different.
Unique, stop yapping -
what are the immediate targets?
With the temporary bottom formed at 1892.50 from the hourly
double bottom setup, the immediate targets are 1933.50 and 1943.50. These are
from the hourly extreme oversold “A+ Tier” signal is still valid as the market
remains above 1892 and coincides with the short-term measure moves. There’s a
possible extension to 1955 and 1965, but ES needs to get above 1945 first in
order for us to confirm it’s a high probability.
Remember, this is only a mini bull train for the deadcat
bounce in the context of the bigger weekly bear train. You must understand the timeframes
and trade accordingly.
If temporary bottom fails, the next major supports are
located at 1880, 1865, 1850 and 1831.
